How Risky Is Tanger Factory Outlet Centers Stock?
There are some clear risk factors Tanger Factory Outlet Centers (NYSE: SKT) investors need to be aware of. E-commerce is an obvious threat to any physical retail business that sells things people don't need, and many of Tanger's tenants fit into this category. E-commerce has steadily climbed from less than 1% of U.S. retail sales in 2000 to nearly 15% today, and this isn't likely to reverse course anytime soon.
In addition, the COVID-19 pandemic has led to several major tenants going bankrupt and closing stores. Ascena Brands (parent of Loft), J.Crew, and Brooks Brothers are just a few reasons why Tanger's occupancy has declined from over 97% at the end of 2019 to less than 92% at the end of 2020.
Finally, unlike other mall REITs, Tanger remains mostly a pure retail play. While Tanger has discussed the need to incorporate non-retail elements into its properties, such as entertainment attractions, it hasn't done too much of that just yet. For example, mall REIT leader Simon Property Group (NYSE: SPG) has been actively adding entertainment venues, trendy restaurants, co-working spaces, apartments, and hotels to its properties to diversify its revenue stream and create "destinations" instead of just retail centers. For the time being, Tanger is mostly reliant on retail. Aside from coffee shops and snack-type food and beverage venues, there really isn't anything other than pure retail at many of Tanger's properties.
Source Fool.com
